FreedomPop Challenges Phone Companies With Free Data Plan

If you feel like too much, Stephen Stokols may have the answers. He has founded a start-up that aims to lower those painfully high cellphone bills by providing a free alternative to pricey mobile data plans.

FreedomPop, backed by Niklas Zennstrom, the co-founder of Skype, will provide users with 500 free megabytes of wireless data per month. If more data is needed the company will provide an additional gigabyte for $10, or five gigabytes for $35.

A similar plan with a large mobile provider costs much more: four gigabytes of data a month provided by Verizon (VZ) is $70, and 300 megabytes a month through AT&T (T) is $20.

To give some context to these numbers, the average U.S. mobile subscriber uses 450 megabytes of data a month. With a 500-megabyte plan you can send 10,000 emails, view 1,500 webpages, upload 200 pictures, and stream two hours of video.

FreedomPop, which is available as a portable wireless hotspot or as a sleeve that wraps around an iPod Touch or iPhone (AAPL), will be a "freemium" product. Much like Spotify or Skype, FreedomPop will create revenue by charging for add-on features.

Although FreedomPop is still in beta, Mr. Stokols has big plans for the future, and a lot of investors are betting on those plans. FreedomPop received $7.5 million in capital in its first round of funding.

"We're really looking to do what Skype did but on an even bigger scale," says Stokols. "The market's massive. It's $100 billion for mobile Internet alone next year."

AT&T and Verizon have dominated the wireless data world for years, with margins reaching 50 to 70%, according to Mr. Stokols. FreedomPop plans on challenging the landscape of the contemporary mobile world.

"We're looking at the industry which is pretty much controlled by a couple of main big, huge players and we're looking to approach and attack that industry from a completely different perspective," Stokols says. "We're looking to come in here and disrupt these huge margins that these big guys enjoy here because they have no competition."

FreedomPop is currently broadcasting through Clearwire (CLWR) WiMax network, a limited network only available to about one-third of the U.S. population. Starting next year, however, FreedomPop will partner with Sprint (S) and broadcast over their LTE network. Sprint, which has about half the market share of AT&T and Verizon, sees FreedomPop as a way to gain customers from other carriers.

FreedomPop may very well change the way we pay for data in the United States, but it's important to remember that there's no such thing as a free lunch.

FreedomPop's coverage areas are lacking and even when they switch to the Sprint LGE network next year, 4G service won't be available everywhere. The packaging is clunky and not yet compatible with most phones. Canceling a wireless data plan may be complicated and come with fees steep enough to render the whole venture moot.

Mr. Stokols is aware of FreedomPop's current limitations but is still hopeful for the future of his device.

Will you use FreedomPop? Let us know what you think in the comments below!

Recommended for You

Conventional wisdom dispensed by financial planners about taking Social Security largely boils down to this: Wait as long as you can. Forty-eight percent of women and 42 percent of men who claimed benefits in 2013 did so at 62, which is the most popular age to start getting Social Security. Part of the reason is that, in some circumstances, waiting simply doesn’t make sense, “The decision on when to start Social Security depends on factors such as how long you expect to live, cash flow needs and marital status,” says Daniel Galli, a certified financial planner in Norwell, Massachusetts.

U.S. home values rose again in October, and a handful of states reported increases exceeded the national average. Housing prices increased 6.7 percent in October compared to the same month a year ago, ...

WASHINGTON/NEW YORK (Reuters) - U.S. President-elect Donald Trump has asked senior Goldman Sachs banker Gary Cohn to coordinate economic policy across his administration, turning to Wall Street for expertise in managing the world's largest economy, NBC News reported on Friday. Trump's pick of Cohn, 56, the firm's president and chief operating officer, to head his White House National Economic Council marks the third time he has tapped an alum of the major investment bank for a senior role in his administration. The NEC coordinates economic policy across federal agencies and if Cohn takes the post, he will follow Robert Rubin and Stephen Friedman, two other one-time Goldman executives who served in that role.

Dec.08 -- Bruin Sports Capital founder and CEO George Pyne discusses TV ratings for National Football League games, slowing growth at ESPN and the new media model for coverage of athletes. He speaks with Scarlet Fu on “What’d You Miss?”

DETROIT (AP) — Companies can now test self-driving cars on Michigan public roads without a driver or steering wheel under new laws that could push the state to the forefront of autonomous vehicle development.

Dec.07 -- Philippine leader Rodrigo Duterte is working on his own impression of President-elect Donald Trump. In a speech in Manila, Duterte imitated Trumps voice and accent from a telephone call between the two earlier this month.

Thinkstock In 2015, the Internal Revenue Service audited only 0.84% of all individual tax returns. So the odds are generally pretty low that your return will be picked for review. That said, your chances ...

Coca-Cola CEO Muhtar Kent will step down from that role next year and be succeeded by the company's No. 2 executive, Chief Operating Officer James Quincey, the company announced Friday. Quincey will take ...

Large banks in Britain want the UK government to allow their industry to remain subject to EU laws for up to five years after Brexit, a move likely to enrage eurosceptics who want to break away from the bloc's legal system as soon as possible. The banks - international players - are also pressing the government to allow the European Court of Justice to rule on decisions related to their businesses during that period, according to a document reviewed by Reuters. The document was drawn up by law firms on behalf of banks lobbying the government for a departure in stages from the EU.

Tag Heuer's renaissance is far from over, its chief executive told Reuters, adding the high-end watch brand still had room to expand in China and other markets after some of the strongest sales growth in the industry this year. LVMH's biggest watch brand in terms of sales has seen revenue growth of more than 10 percent so far in 2016, compared with a drop of more than 10 percent just two years ago, Jean-Claude Biver said in an interview. First hit in 2012 by China's crackdown on gift giving to officials, it then suffered from various market shocks and a tourism slump after militant attacks in Europe in 2015 and 2016.

The move from Peet's comes as Starbucks is making significant investment to stave off competition from upscale, independent coffee shops, such as Stumptown Coffee Roasters and Intelligentsia Coffee. Peet's owns Stumptown and has a majority stake in Intelligentsia. Peet's Chief Executive Dave Burwick told Reuters the new plant will create 135 new jobs and support the company's expanding business, which includes operating cafes and selling packaged coffee via grocery stores.